Project had stalled after developer was charged in connection to a Ponzi scheme.

Nearly three years after construction stalled at the Summit Ridge Apartments on Allentown's east side, a New Jersey real estate firm has picked up where the project's bankrupt developer left off.

After foreclosing on the property and winning an $8.3 million verdict in Lehigh County Court, Diversified Realty Associates of Summit, N.J., aims to complete the luxury apartment buildings by the end of the year.

The project's hiatus, which left some residents living amid an abandoned construction site, was the result of former developer David Connolly's financial meltdown that led federal prosecutors to charge him last year with running a real estate Ponzi scheme.

Connolly, who owned as many as 18 properties in Allentown, pleaded guilty Feb. 4 to one count of securities fraud and one count of money laundering in a scheme that bilked more than 200 people out of at least $9 million, according to court records.

He is scheduled to be sentenced June 4 in U.S. District Court in Newark.

For Jonathan Stein of Diversified Realty, the failure of Connolly's company was an opportunity to get a head start on a luxury apartment complex in a unique location.

"For us, it's a great investment in real estate and that's why we were interested in getting to the property," Stein said.

Situated on secluded River Drive near Keck Park, the 200-unit Summit Ridge Apartments feature views of South Mountain. Inside, Stein said, the apartments are a cut above typical rental properties, with granite counters and hardwood floors.

The one- and two-bedroom apartments rent for $1,000 to $1,300 a month. Stein said the apartments fulfill a demand for high-end rentals that is underserved in the Lehigh Valley.

After foreclosing on the nearly 17-acre lot, improvements and one completed apartment building last year, Diversified Realty sued for the difference between the fair market value of the property and the $15.6 million that Connolly and business partner Richard Colasuonno owed on the mortgage.

Following a bench trial Feb. 4, Lehigh County Judge J. Brian Johnson ruled last month that the fair market value of the property was about $7.3 million and entered a verdict against Connolly and Colasuonno for $8.3 million.

Allentown attorney Joel Wiener, who represented Connolly and Colasuonno, declined to comment on the decision.

Called Hillside Valley under Connolly's ownership, the River Drive project is not the only Allentown property that he owned to fall into disrepair and find new owners as a bank worked to stem its losses.

Last year developer Nat Hyman bought the Livingston Building at 1411 Hamilton St. for $1 million from New York Community Bank after Connolly's company stopped paying the bills and the tenants moved out. Hyman announced plans to invest $1.8 million to renovate the ornate six-story apartment building.

The downfall of Connolly's real estate empire, which once extended to 60 properties in Pennsylvania and New Jersey, is described in the indictment charging him in January with 15 counts including securities fraud, mail fraud, wire fraud and money laundering.

According to the indictment, Connolly asked friends, family and others to invest in apartment buildings throughout Pennsylvania and New Jersey. For each of the properties he invested in, Connolly set up a separate company and established a trust and promised investors a return of 12 percent a year or more.

For each of the investment properties, Connolly kept a number of shares and paid himself a management fee along with distributions the investors. In 2008, the indictment says, Connolly paid himself more than $700,000.

By 2006, the properties were failing to generate sufficient income to pay expenses and cover mortgages. Rather than reduce his payments to investors, he solicited new investments and refinanced many of the buildings to cover the shortfalls, the indictment says.

By October 2009, all of the apartment buildings were in foreclosure or bankruptcy, the indictment says.